Petrochemical costs and energy-intensive sectors under pressure

The intensifying war in the Middle East is sending shockwaves through global supply chains, prompting calls for the Thai government to urgently secure backup petrochemical feedstocks.

The conflict, which began on February 28, 2026, continues to disrupt shipments of crude oil and petrochemical products through the Strait of Hormuz, pushing up crude prices and interrupting supplies of key feedstocks. Some plants have already been forced to suspend operations. SCC has temporarily halted operations at its Rayong Olefins (ROC) plant due to shortages of naphtha and propane.

Kriengkrai Thiennukul, chairman of the Federation of Thai Industries (FTI), said an olefins plant in Rayong had temporarily suspended production after running short of naphtha, an upstream raw material. As a result, plastic resin prices jumped immediately by 30-40%, with knock-on effects spreading to frozen food and consumer goods industries, which could face a packaging shortage. He said the government should secure alternative sources of feedstocks to prevent further disruption to production lines.

The war in the Middle East is now severely affecting the global supply chain, particularly around the Strait of Hormuz, a strategic route used by Thailand to transport energy and petrochemical products. Beyond the loss of crude oil and liquefied natural gas (LNG) supplies from the region, the most serious concern is a shortage of raw materials for petrochemicals and packaging.

The impact is also spreading to other industries. Imports of chemical fertiliser and aluminium ingots have started to face disruption, while a helium crisis in Qatar could affect global semiconductor production.

Supakit Boonsiri, director of the Office of Industrial Economics (OIE), said the closure of the Strait of Hormuz was a critical issue to watch closely, particularly for three petrochemical feedstocks directly affected by raw material costs.

The first is naphtha, which is used as a component in petrol production and as a feedstock in petrochemical industries, particularly olefins plants. It is a crucial raw material in the production of a wide range of plastic resins, including polyethylene, the main material used in food packaging, as well as polypropylene (PP), which is used in food packaging, automotive parts and medical equipment.

The second is ethylene, a key feedstock in the production of many polymers, including polyethylene, as well as polyvinyl chloride (PVC), which is used to make plastic pipes. It is also used to produce ethylene glycol, a precursor for polyester and synthetic fibres, and ethylene oxide, which is used in the medical industry.

The third is propylene, another major feedstock used in the manufacture of multiple polymers, including polypropylene (PP), PVC and Bisphenol A (BPA), a precursor for plastic production.

Industries directly affected are energy-intensive sectors, including cement and concrete, glass and flat glass, ceramics and tiles, gas and petroleum, textiles and garments, and pulp and paper.

According to the Commerce Ministry, the closure of the Strait of Hormuz has also affected shipments of urea fertiliser, which Thailand mainly imports from Saudi Arabia. The government has now expanded import channels by sourcing chemical fertiliser from alternative suppliers such as Malaysia and Brunei, where shipments continue as normal. Thailand currently has 8.5 million sacks of urea fertiliser, enough to meet demand until August 2026.

VDC Col Plengsakdi Prakaspesat, president of the Thai Fertiliser Trade and Agricultural Business Association, said fertiliser is another product group shipped through the Strait of Hormuz. However, the association has confirmed that Thailand still has sufficient fertiliser stocks for about two to two-and-a-half months, in line with demand projections from state agencies.

Prapan Pusayapaiboon, managing director of Yodkhun Food Co Ltd, producer of snack brands Cornae, Potae and Paprika, said manufacturers are worried about rising production costs, particularly plastic packaging, which already accounts for 20% of production costs. He added that palm oil prices must also be monitored closely, as they affect snack production costs.

Although crude palm output is entering the market and prices remain low, palm oil has already risen to Bt40 per kilogramme. The company has locked in costs with suppliers until April 2026, after which major suppliers are expected to announce entirely new cost structures.

“We estimate that we can still absorb the burden for another two to three months. In the second quarter, we may still be able to hold prices to some extent because some costs have already been locked in. But plastic resin suppliers are only accepting orders up to April, with prices already up by 5%. After that, they will no longer accept bookings at current prices. As for factories that rely on electricity, any price increase will have an immediate impact,” he said.

Manufacturers are not only concerned about packaging costs but also raw materials such as wheat flour, which is imported from Europe. If freight charges rise, and especially if shipping through the Red Sea remains impossible, vessels will have to take longer detours, which could lead to shortages.

“A product shortage is possible if manufacturers do not have enough raw materials. Right now, no one dares enter the Red Sea, so shipments must take alternative routes, and wheat flour is imported from Europe,” he said.

As a producer of consumer goods, he said the company hoped the Middle East crisis would end soon. But if it drags on, the firm would only be able to hold the line for another one to two months, particularly in trying to keep prices stable for consumers.

Pravit Srisangnam, chief executive of Charoen Industries Plc (CH), a producer and distributor of processed fruit and food, said the company’s factories use two forms of energy — steam and coal — which account for 1.8% of production costs.

One supplier has already quoted a new coal price of Bt5,030 per tonne, up by Bt500-Bt800 per tonne, or 11-28%. Another supplier quoted Bt4,400 per tonne, raising overall production costs by about 1.9%, or no more than 2%.

Electricity, purchased at Bt3 per unit, accounts for 1.2% of production costs and has not yet been adjusted. He noted that during the Russia-Ukraine war, coal prices had once hit Bt6,000 per tonne. If coal remains below Bt5,000 per tonne, the company believes it can still absorb the cost burden.

Oil and natural gas vehicle (NGV) prices, which affect the transport sector, also have implications for suppliers delivering raw materials and packaging to the company. Shipping goods from containers to cargo vessels for export has not yet seen any price increase, but plastic packaging prices have already been raised.

“If diesel at the pump rises to Bt33-Bt36 per litre from Bt30.44, it will hit three sectors — agriculture, transport and services, and tourism. We are in the agricultural sector, so suppliers transporting raw materials will definitely raise prices. Sending goods to port by truck, tractor unit or ten-wheeler already costs more than Bt10,000 per trip. If diesel rises by Bt3, transport costs will increase by 10%,” he said.

The company has also sent a team to China with samples of its 10 biggest packaging items to compare specifications and prepare new designs. Some replacements are expected to arrive by the fourth week, or as early as next week.

The pharmaceutical and medical supply sector is also at risk. In particular, packaging for saline solution and dialysis fluid, which are widely used every day in Thailand, is made from plastic derived from petrochemical products imported from some Middle Eastern countries. Rubber glove production is also facing raw material constraints, especially fuel oil and rubber processing oil, with supplies expected to last only until around Songkran 2026.

Surachai Ruengsuksilp, chairman of the Pharmaceutical Industry Club under the Federation of Thai Industries, said the pharmaceutical sector is facing cost increases of around 20%, particularly in logistics. This includes the transport of active pharmaceutical ingredients (APIs) from abroad, especially China and India, where competition for raw materials has intensified amid higher costs, as well as domestic distribution of finished products affected by rising fuel prices.

Supattra Boonserm, secretary-general of the Food and Drug Administration, said there is currently no shortage of medicines or medical supplies, with Thailand holding reserves sufficient for at least three months. As for hospitals shortening the duration of outpatient prescriptions, she said this was a precautionary and preparedness measure in case of an emergency.